Chinese Solar Project Developers Tackling U.S.

The U.S. market isn’t just attractive to solar energy equipment makers from China, it is also drawing solar project developers from the country. Wells Fargo on Monday said it will fund “over $100 million” worth of projects to be developed by GCL Solar Energy, a subsidiary of the Hong Kong-based GCL-Poly Energy Holdings.

GCL-Poly produces silicon and turns it into wafers for making solar cells. It claims to be China’s largest silicon producer and expects to have 21,000 metric tons of factory capacity by the end of this year (3.5 gigawatts of wafer production capacity). It also owns a 20-megawatt solar power plant in the Jiangsu Province of China.

Wells Fargo has been an active financier of solar power projects in order to reap tax benefits in recent years, and seemed to have funded mostly American project developers. Last year, the bank committed $100 million to projects built by SunPower. Wells Fargo also forked over $250 million to SunEdison and MMA Renewable Ventures. As the project owner, Wells Fargo can claim a 30 percent investment tax credit or an equivalent amount in cash from the federal government.

Solar companies and analysts have pegged the U.S. as the next big market. Europe remains the largest thanks to the generous government incentives, but these incentives are set to decline, sometimes sooner than expected. Germany, the largest solar market, plans to cut its feed-in tariff by 13 percent come January. First Solar, which has counted Germany as its biggest market, expects to see the country making up 25-30 percent of its business in 2011 instead of nearly 50 percent in 2010, First Solar executives said last month. Sharp recently bought San Francisco-based project developer, Recurrent Energy, for $305 million in cash.

China is home to some of the world’s largest solar energy equipment makers, from silicon to solar panels. These companies historically have expanded their reach mostly through vertical integration – owning factories that build raw materials, components and then final products. Some, such as silicon producer LDK Solar, also are moving into the project development business domestically and abroad. Suntech Power tried to build a project development business in the U.S., but decided that venture wasn’t worth its while.

Founded only last year, San Francisco-based GCL Solar plans to use Wells Fargo’s money to build and operate power projects and sell the electricity to customers. Businesses, schools, public agencies and utilities are the target customers. Power purchase agreements have been a popular way for those who want to use solar electricity without having to pay the hefty upfront costs of installing the equipment. Wells Fargo will own the projects.

GCL Solar plans to complete the Wells Fargo-funded projects by the end of 2011. Neither company disclosed how many project or how much solar power generation could be had for about $100 million. The average price for a solar energy system reached about $5.85 per watt earlier this year (from residential to utility-scale), according to GTM Research. So Wells Fargo’s funding could fund over 17 megawatts projects.